Change the Executive Search Trend by Cultivating Internal Talent

Here’s a familiar story in corporate America: A top executive unexpectedly leaves a company and the organization is unprepared for the vacancy, so it turns to an executive search firm to fill the position, a move that fails to utilize internal talent.

To curb this reliance on executive search firms, companies should first look to their own ranks before enlisting the help of an executive recruiter. But to do this, organizations must have a clear understanding of where talent resides in the business.

“Throughout the past two decades, too many employers have been swayed by executive recruiters’ contentions that the only place to go for world-class talent is outside,” said Joseph Daniel McCool, author of Deciding Who Leads: How Executive Recruiters Drive, Direct & Disrupt the Global Search for Leadership Talent.

“We’ve seen many of them look externally for leadership candidates and pay a compensation premium of anywhere between 25 and 50 percent to attract talented outsiders. Employees haven’t had the same kind of [advocates]. Many good people are still overlooked and written off because companies don’t have their succession act together. Therefore, they feel they have to search outside because they don’t have any reading on where talent resides in their own organizations.”

If companies want to become more independent in terms of recruiting, they have to harness internal talent and groom those potential leaders through development opportunities.

“The whole idea of executive recruiting was that it was supposed to be used sparingly by hiring companies when they could not fill a critical position from within, but somewhere along the line, hiring companies lost focus of that fact,” said McCool, who is also a writer, speaker and adviser on executive recruiting and corporate management succession best practices. “Companies need to do more to develop their own leaders; then they won’t be so reliant on external talent.”

Once an organization selects a leader, it’s critical that the executive receives support, especially in today’s climate in which executive tenure is at an all-time low and the demands of leadership are at an all-time high.

“Most organizations have perpetuated a sink-or-swim approach to executive integration,” McCool said. “Many hiring organizations provide little or no support for a new executive once they’ve landed in a management role. The feeling is that this person is an executive, they will know how to navigate our organization. [That’s] a very costly assumption. One of the things I prescribe in the book is for companies to understand that executive on-boarding is an essential insurance policy that should follow every single one of their investments in external search.”

After companies have located internal talent and created programs to develop that talent, then a management succession plan can be actualized. Currently, a “startling number” of companies do not have these types of plans in place, which leaves them unprepared if a crisis hits, according to McCool.

“Companies fail to develop their own talent, and they fail to plan for the future. And that is the epicenter of a good succession plan,” he explained. “[It’s] a risk management tool for the organization to understand which critical roles might be filled through internal promotion and which portion of the future management agenda may need to be fulfilled by people who currently work outside the organization.”